PALO ALTO — Comcast announced Thursday that it intends to buy Time Warner Cable for a cool $45 billion. The splashy deal would unite what are already the two largest cable players in the United States, and the combination would reach one in three homes—if regulators let it through. The Recorder spoke with Mark Ostrau, co-chairman of Fenwick & West’s antitrust and unfair competition group, for his take on the news.
Q. Did the announcement of this deal surprise you at all?
A: On the one hand, it should be expected given what looks like the inevitable march toward consolidation, not just in this industry, but in the telecommunications space generally. It’s interesting how these companies keep pushing the envelope in terms of what’s acceptable to the SEC and FCC regulatory authorities. When this comes right on the heels of the net neutrality ruling, it gives a lot of fuel to net neutrality advocates who say we really do need something. One argument against an FCC regulatory regime would be that competition—or laws protecting against anti-competitive behavior—will discipline the market, but if there’s increasing consolidation, this argument is less and less viable.
Q. What is the antitrust calculus here for these two cable companies and D.C. regulators?
A: It’s not completely uncharted territory in the sense that this is not the first major consolidation. It’s more like at what point does it tip over the line. That was the idea with the US Airways-American merger, which argued that they had let so many others before do it. At some point, there’s just too much. We know there’s going to be a review and some significant concerns, so the analysis is not whether there will be problems, but whether there’s a fix that will work for everyone. Clearly, Comcast already knows it will have to divest some things. … Where it gets a little harder to gauge is that in a lot of industries there has been a change in the way competition is viewed. Where it used to be just local markets, now there is more recognition that there are competitive effects at a national level.
Q. When did that start to take root?
A: There have been hints of it from time to time, but the first instance that really signified a move was probably the AT&T and T-Mobile deal. It was explicit there, it was implicit in US Airways-American, and I’m sure it will be addressed in [this deal].
Q. Comcast says that consumers will benefit from the tech innovations that would come from the combination of these companies. But what might it mean for smaller players who are innovating in this space?
A: I’m very skeptical of promises that a transaction would have huge benefits to innovation. It’s hard to see why a company by itself isn’t sufficiently large to power that, unless there’s some clear technology that already exists in each company that [works better] together. But the idea that you’re bigger so you innovate more? There’s a good argument that the opposite is true.
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